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TMI Blog1971 (4) TMI 13X X X X Extracts X X X X X X X X Extracts X X X X ..... the entry and the borrowing. The Income-tax Officer, on such material and facts placed before him, completed the assessment and accepted that the above sum of Rs. 50,000 was a genuine borrowing made by the petitioner in the course of business and that the interest paid thereon was susceptible to allowance under the law. After the completion of the assessment in the manner stated above, it appears that the assessment of M/s. Gordhandas Mulchand came up for scrutiny and orders before the II Income-tax Officer, Circle II, Salem. In the course of the said assessment proceedings, the Income-tax Officer, Circle II, Salem, who was the assessing officer of the creditor, discovered that M/s. Gordhandas Mulchand did not lend this sum of Rs. 50,000 as claimed by the petitioner and made a declaration to that effect. The Income-tax Officer dealing with the petitioner's assessment, having been so informed, called upon M/s. Gordhandas Mulchand and sought information from him whether the credit of Rs. 50,000 disclosed in the books of account of the petitioner was regular. M/s. Gordhandas Mulchand declared that such a credit was not genuine. When the petitioner was confronted. with the said declar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t. Section 147 dealing with income escaping assessment lays down, as it were, the criteria under which the Income-tax Officer could act and treat an assessment which was closed as if it ought to be reopened on the ground that the income has escaped assessment. Under clause (a) of section 147, if the Income-tax Officer has reason to believe that, by reason of the omission or failure on the part of an assessee to make a return, or to disclose fully and truly all material facts necessary for his assessment for that year and under sub-clause (b) of the same section, if the Income-tax Officer has in consequence of information in his possession reason to believe that income chargeable to tax has escaped assessment for any assessment year, he may proceed as prescribed to bring to tax such escapement. Explanation 2 is the relevant Explanation which has to be noticed for purposes of this case. It provides : " Production before the Income-tax Officer of account books or other evidence from which material evidence could with due diligence have been discovered by the Income-tax Officer will not necessarily amount to disclosure within the meaning of this section." Section 149 prescribes a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... full, but also be true. It is not enough if it is only full, for, it may contain untrue material. It is not equally enough if, it is true, for, equally, it may not be full. In this behalf, therefore, the two elements prescribed by the statute, namely, the fullness and truthfulness of the materials, should invariably be present, which only can disable the Income-tax Officer from acting under section 147(a). Under section 147(b) the Income-tax Officer is enabled to act, notwithstanding that there has been no omission or failure as mentioned in clause (a) on the part of the assessee In a case where the Income-tax Officer has, in consequence of information in his possession, reason to believe that the income exigible to tax has escaped assessment for any assessment year, even then it would fit in to a case of escaped assessment. The impugned notice is issued by the Income-tax Officer generally under section 147 of the Income-tax Act. No specific sub-section of this primary section is mentioned by the Income-tax Officer. It is, therefore, urged by the learned counsel for the petitioner that, in the facts and circumstances of this case, the alleged escapement comes squarely within the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ay, for example--' I have produced the account books and the documents : You, the assessing officer, examine them, and find out the facts necessary for your purpose : My duty is done with disclosing these account books and the documents.....' The position, therefore, is that if there were in fact some reasonable grounds for thinking that there had been any non-disclosure as regards any primary fact, which could have a material bearing on the question of under-assessment, that would be sufficient to give jurisdiction to the Income-tax Officer to issue the notices under section 34. Whether these grounds were adequate or not for arriving at the conclusion that there was a non-disclosure of material facts would not be open for the court's investigation." (Underlining is ours.) With this background as to the proposition well-said and well-settled by the Supreme Court, we shall now examine the decisions quoted by the learned counsel for the petitioner in support of his contention that the Income-tax Officer, in the instant case, had no jurisdiction to issue the impugned notice, for all the materials or primary facts were before the original authority when the assessment for the year ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng received loan of Rs. 50,000 from M/s. Gordhandas Mulchand, Bankers, Salem. The assessee has also claimed interest payment if Rs. 1,155 to the said banker. According to the information available on record, have reason to believe that the transaction the assessee had with M/s. Gordhandas Mulchand is bogus. I have also reason to believe that the interest claimed, viz , Rs. 1,155, and allowed in the assessment is not allowable in view of the fact that the transaction with the above, and banker was not genuine. I have also reason to believe that there was under-assessment of total income to the extent of Rs. 51,155, due to failure on the part of the assessee to disclosefully and truly all material facts necessary for the assessment of 1962-63. As there is under-assessment of total income to the extent of Rs. 51,155 action is called for under section 147(a) to reopen the assessment. Tax effect in the hands of the firm roughly works out to Rs. 4,806. I request that kind sanction may be accorded to reopen the assessment of 1962-63. " He has given cogent and clear reasons as to the basis for his action and what prompted him to take action. There was therefore, enough material for him t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... if he finds on subsequent discovery that such material is false and such material is untrue and not full. It is common knowledge that in trade and commerce cash credits are obtained as a matter of course and it is not such an unsual event which would provoke even in the first instance any assessing authority to delve and probe into the genuineness of the transaction. It would be highly impossible for commerce to run the trade if the revenue were to take such an attitude and begin to suspect every such credit obtained by a bona fide dealer or trader in the normal course of his business. It is only in cases where there is later information founded on reliable evidence and data which would shock the conscience of a reasonable person and provoke him to act under section 147 read with section 148 that it could be said that the Income-tax Officer when he issues a notice under Section 148 in such circumstances had the necessary jurisdiction to do so. The ratio in Madhya Pradesh Industries Ltd. v. Income-tax Officer, Nagpur, is not therefore applicable to the facts of this case. As already stated, this is a case where without examining the creditor, who was described to be the real and ..... X X X X Extracts X X X X X X X X Extracts X X X X
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